VENTURE ENVIRONMENTALISM
Alec Guettel '91 is crafting a solar energy overhaul one sale at a time
Oakland, CA — Just two years after collecting his diploma, Alec Guettel ’91 landed his dream job.
For a guy who spent four years at Carolina leading environmental groups, that first resume line reads like an absurd fantasy: “Special Assistant to EPA Administrator Carol Browner.” Just below: “As Special Assistant for International Activities, acted as chief aid to EPA Administrator Browner for international policy and operations.”
Guettel was 24 years old, and he had arrived at the center of the policy universe. “I really couldn’t believe I got that job,” he recalled. “[Browner] was a total powerhouse, and I just thought we were going to do so much good stuff.”
At the top of the agenda was Superfund, the 1980 law governing the cleanup of the country’s worst toxic waste dumps. Troubled from the start, Superfund projects were floundering by the time Browner began pushing for reform.
“It was a mess and everybody hated it,” Guettel said. “She had Greenpeace behind her, and the Chemical Manufacturers Association. She had everybody on board.”
Browner also had years of Capitol Hill experience, having been a Senate aid and served as legal counsel to the Senate Committee on Energy and Natural Resources. She knew how to navigate the arcane process of revamping and reauthorizing the Superfund bill, and she had the full backing of President Bill Clinton.
“And she still couldn’t get it done,” Guettel recalled ruefully. “Just because politics are politics, and it was coming up on the midterms.” In what the New York Times called “a bitter disappointment,” the administration withdrew the reform effort.
Dispirited and badly disillusioned, Guettel left the fantasy job after little more than a year. “It was really frustrating to watch and be a part of.” And it convinced Guettel—the ardent activist and devoted student of politics and policy—that the world’s environmental woes might be better tackled outside of government.
-------------------------------
Oakland, California, is about as far away from Capitol Hill as a continental American can get. So it should come as little surprise that the Oakland waterfront— right on Jack London Square, alongside a lovely little marina—is where Guettel has chosen to launch a very different sort of environmental effort.
Sungevity is innovative. It’s high-tech. It stands a decent chance of pushing solar energy closer to mainstream.
And along the way, it will likely make Guettel and his business partners a good deal of money. The wouldbe bureaucrat has become a successful businessman.
“By the time I finished at the EPA, I was pretty committed to doing start-ups,” Guettel said. “Part of my job there had been working with environmental technology companies—so we could talk about jobs or whatever it is we do in government—and I thought, ‘Well that looks cool.’”
And it does, emphatically, look cool. In the lobby of Sungevity’s offices, employees hustle past in jeans and bright orange t-shirts emblazoned with the firm’s logo, a geometric sunflower. The vibe is bustling but unstressed; maintenance workers arrive to install more phone lines, and college-age employees carry half-built cubicle walls down the hall.
Danny Kennedy, the company’s cofounder and a longtime friend of Guettel’s, served as tour guide during a September visit. Sungevity’s thirdfloor offices are an architectural stereotype of West Coast green-tech, with an open floor plan and gorgeous casement windows filled with California sunshine. The employee kitchen features a full-sized pool table, and a group of denim-clad technicians were racking a fresh game at 11:00 in the morning.
Around the corner, movers and electricians assembled dozens of low-walled cubicles, preparing to accommodate the next wave of Sungevity’s growing workforce. The company has already spilled out of its main office and into the cavernous shell of a defunct Barnes & Noble across the street.
“For all I know, those guys might’ve just been stealing stuff,” Kennedy said, motioning after a group of orange-clad young people schlepping computer monitors down a hallway. “Every day I’m looking at people going, ‘Hi! Who are you?’”
With his low, gravelly voice and Australian accent, Kennedy sounds wearily amused at everything going on around him. He sports a mop of curly hair atop a very furrowed brow, and it doesn’t take long to realize he is, in fact, wearily amused at everything going on around him.
As with so many great business partnerships, the tale of Guettel and Kennedy begins with an oversized penguin costume and an English pub.
It was the summer of 1990—after Guettel’s junior year of college—and international delegates were gathered in London to negotiate the first revision of the Montreal Protocol on Substances that Deplete the Ozone Layer.
Kennedy, having proven himself a champion debater, was tapped by the Australian government to serve as a youth delegate to the conference. Guettel, having secured Morehead funding to travel around Europe building connections between student environmentalists, was standing outside the conference, shouting unflattering things at the delegates.
“I was at this protest wearing a penguin suit—like a penguin costume,” he recounted. “I can’t really remember what the premise was.”
Kennedy ventured out to enjoy the commotion, and the two struck up a conversation. “Being twenty-yearolds in a foreign city, we both ended up in a pub face down about twelve hours later,” Guettel said. “We’ve been great friends ever since.”
That friendship endured through Guettel’s stint at the EPA, through his years at Stanford Business School, and through his first business ventures, including the launch of a wildly successful alternative law firm, Axiom Law. While Guettel spent a decade establishing himself as a successful entrepreneur, Kennedy rose through the ranks of Greenpeace, becoming the activist organization’s campaign director for Australia and the Pacific.
“We had always talked about starting a green technology company together,” Guettel said. “We went through a whole series of truly bad ideas before we finally sort of zeroed in on Sungevity.”
-------------------------------
The core concept is deceptively straightforward: remote solar design.
It is the term of art for what all those just-graduated kids are doing in Oakland, staring at satellite photos of rooftops and plugging numbers into a complex set of algorithms. A Sungevity technician, using publicly available satellite images and aerial photography, can design an entire solar rooftop without getting up for a coffee break.
“They’re sizing systems from California to the Empire State, which is pretty cool,” Kennedy said, surveying a row of busy orange t-shirts arrayed in front of computer monitors. “I’m a solar geek, so it excites me to this day to see this.”
We tend to romanticize this kind of innovation, to imagine it as a sudden flash of genius—a breakthrough in the lab or a eureka moment in someone’s garage.
Listening to Guettel and Kennedy, though, drives home the reality that innovation is most often a slow-going, grinding process. Profound changes flow from some very unsexy ideas.
“We’re not technologists,” Kennedy said, explaining the beginnings of the company. “We didn’t know how to make a better solar panel, and other people were already working on that.”
Instead, he and Guettel set out to make solar less annoying for homeowners.
If that sounds like a modest goal, consider the old process of purchasing a solar system. For the past few decades, an eco-conscious homeowner would have to find a local solar installer.
Like any contractor, Local Solar, Inc. schedules an appointment for an appraisal. The homeowner takes an afternoon off work so that Local Solar can come by, climb onto the roof, and crawl around taking measurements. A few days later, an estimate arrives. If she decides to go for it, our homeowner has to work with Local Solar to file all of the permits and paperwork necessary to get approval—paperwork from her town, her county, and even her power company.
“Nothing about it was convenient,” Guettel said. “The experience for customers on the residential end was a disaster in so many ways.”
And to top it off, homeowners typically had to shell out the full purchase and installation price—usually tens of thousands of dollars. It takes decades for that kind of investment to pay off.
To Guettel and Kennedy, this convoluted process presented an opportunity. “There was a ton of energy and effort going into solar hardware,” Guettel recounted. “You could see with all of the investment happening upstream, prices were going to come down.”
Guettel describes entrepreneurship as the ability to see a wave building. “You might not ride it perfectly, but as long as you’re actually in front of a wave you can make something good happen.”
By late 2007, he and Kennedy were lining up Sungevity in front of a wave. Almost on cue, the price of solar panels began to plummet. They found a third partner, a former BP engineer named Andrew Birch, and began to craft a better experience for customers.
They developed and honed the remote-design technology, hiring an Australian math whiz to create the sophisticated algorithms that allow employees with three weeks of training to predict the effects of roof slope, tree shade, and weather patterns on the output of a solar array.
Within 24 hours of submitting an address, a potential customer gets a straightforward answer about whether solar is a feasible option. (If your roof faces north, you’re probably out of luck.)
They hired teams of data crunchers to comb through nightmarish piles of state, county, and town zoning regulations. (Quick: how many feet of clearance does the Poughkeepsie fire department require on either side of the peak in your roof? Sungevity knows.)
They located, vetted, and trained contractors and electricians to handle the installation in different markets, allowing Sungevity to scale quickly without purchasing a fleet of trucks or directly hiring an army of solar installers.
And they assembled a team of regulatory specialists to track the ever-shifting patchwork of tax incentives, subsidies, and energy programs in the eight states where Sungevity operates. Though consumer subsidies have played a role in determining which markets Sungevity can profitably enter, both Guettel and Kennedy voiced frustration at the unpredictable schemes.
“We need certainty,” Kennedy said. “If you’re changing the rules in a given market every six months or every year, building a business there is very fraught. The technology works—it sits there on your roof for twenty, thirty, even fifty years, day-in, day-out, generating electricity. It’s the people running the energy markets who create all of this uncertainty.”
The biggest factor in deciding to enter a given market is the cost of traditional power sources. Sungevity has ventured into New York and New Jersey, where electricity costs are high, but not a single state in the Southeast, where power is generally coal-fired and cheap.
Guettel and Kennedy have little patience for those who decry consumer solar subsidies, noting that traditional utilities are regulated monopolies. “The point of subsidies isn’t to be there forever,” Guettel said. “It’s to help an industry get to scale.”
-------------------------------
In large part because of the turbulence in the market for renewables, the most critical leg of Sungevity’s business model—consumer financing—was also the most difficult to secure.
A leasing option would allow customers to skip the prohibitively expensive up-front cost in favor of a monthly payment. “I mean, who has thirty thousand dollars to drop on this?” Guettel said.
But for all of Guettel’s foresight in predicting a sharp drop in the price of solar panels, Sungevity’s consumer-friendly business model was nearly swamped by a wave he didn’t see coming.
“The leasing solution was planned from the beginning,” Kennedy recalls. “But we launched in April of 2008, shortly before the world went crazy and the financial services industry stopped doing financing or servicing.”
As credit markets froze and the economy entered a sharp downturn, few banks were willing to finance a new and unproven asset class. For almost two years, Sungevity was stuck offering cash-only sales to traditional early adopters in the California market.
Today, Kennedy counts that as a blessing. “We got to perfect our design and sales systems for a couple years,” he said. “It’s a case of what doesn’t kill you makes you stronger.”
When the leasing option debuted in 2010, sales exploded. Volume grew by a factor of ten in a single year, and now more than 90 percent of customers opt for the leasing plan.
Partly as a result of that growth, Guettel has had to learn a new skill: applying the brakes. “When you have a good business and eighteen different doors are opening, saying no to sixteen of those is still the hardest part for me,” he said. “Most of my time at Sungevity now is evaluating new opportunities, and it’s hard to say no.”
Perhaps the best example of having to take things slow is the company’s recent partnership with Lowe’s. In May of 2011, the home improvement giant selected Sungevity to be its solar provider, offering to steer customers in its 1,750 stores to Sungevity for solar upgrades.
Kennedy’s eyes bug out at the thought. “We simply couldn’t do that right now,” he said. “We’re on a very intentional path to becoming a multi-billion dollar business, and you don’t want to mess that up by becoming the jerks who disappointed a whole bunch of customers.”
So instead of leaping at the Lowe’s deal, Guettel negotiated a phased introduction, beginning with a trial run in northern California and slowly expanding into other Lowe’s markets. In the meantime, Lowe’s bought a sizable stake in the company.
The deal goes to the heart of Sungevity’s long-term strategy, which is making the leap from quirky early adopters to more mainstream consumers. It is the reason their sales pitch focuses far less on environmental concerns than on very practical economics. They’re not preaching solar as a means to live off the grid, but as a supplement to to traditional power.
Sungevity’s much-touted iQuote, the online estimate a customer receives after submitting an address, looks like a brilliant bit of activism, a kind of environmentalist banner for the digital age. Why dress in a penguin suit and chant protest slogans when you can offer zero money down and drastically reduce energy consumption?
To be sure, the iQuote pushes all the right environmental buttons, showing how much carbon dioxide a Sungevity system will keep out of the environment; it’ll even calculate the equivalent car miles not driven or the number of trees planted.
But it’s telling that the green angle is never front and center; the very first thing that pops up in an iQuote is a bold-faced estimate of monthly savings.
“We're trying to talk to normal people,” Kennedy said, offering a summary of the Sungevity sales pitch. “You know that stuff that comes out of the wall and into the plug? We can get you that—easy. And for less. Oh, and it’s green, as well, so it doesn't kill your children."
-------------------------------
That last bit—the not killing your children part—hints at one of the more intriguing aspects of the whole Sungevity venture. It is very much a business, with investors and bank partnerships and the prospect of making a number of people—not least of all Kennedy and Guettel—significantly richer. But in listening to the two of them, there is an unmistakable sense of the profit motive as an afterthought.
Both men, for example, seemed nonplussed at the fact that competitors are copying the satellite design technique.
“From a missionary point of view, I like the fact that most companies are trying to rip us off,” Kennedy said. “It sort of has to be this way. We’re not going to do millions of roofs in suburbia by driving trucks into traffic [to visit houses]. We have to do it with a more efficient model, and this is the best someone has come up with so far.”
Neither of them preach it, exactly, but there is a clear impression that getting solar panels on millions of roofs is the whole point. Sungevity was born not so much of the desire to be in business—Guettel already has a successful legal business in New York, and Kennedy worked for more than a decade at Greenpeace—but of a long-held desire to upend bad energy policy.
“People have no idea yet how fast this is going to happen,” Guettel said about the growth of solar energy. “It’s a political football right now, but three years from now this is going to be the norm.”
In 1994, as Guettel collected recommendation letters for graduate school, Morehead Foundation Director Chuck Lovelace wrote to highlight Guettel’s environmental work. “Few undergraduates are able to focus on and remain committed to a single cause throughout their four years on campus,” Lovelace wrote. “Alec is an exception. He made significant contributions on local, national, and international levels in environmental policy and advocacy.”
Two decades later, it’s not hard to see Sungevity as a highly evolved, market-friendly form of that same advocacy. It is easy to imagine that Guettel, for all the twists of his career, hasn’t lost focus at all.
“This is one of the biggest economic opportunities in history, the retooling of the electricity grid,” Kennedy said. “There are a lot of people who are going to make a fortune and create a lot of good.”
And even more succinctly: “Save you money, save the world. That’s the challenge.”
It is the challenge Guettel chose when he left the EPA. It is the challenge that led him to reject offers at some of the world’s best public policy schools in favor of learning business at Stanford.
“The reasons things weren’t getting done were just so illogical, and wrong,” Guettel said of his time in government. “I was afraid of looking back at the end and saying, ‘I can’t really point to anything I’ve accomplished here.’”
At Sungevity, with keyboards clattering across scores of new rooftops each day, that seems a very distant worry. ◆
-------------------------------
Originally published in The Scholar, the alumni magazine of the Morehead-Cain Foundation at UNC Chapel Hill.
See full issue here (pdf).